The Fair Labor Standards Act (FLSA) has been a source of stress for employers since its passage in 1938. It establishes minimum wage, overtime pay, recordkeeping and youth employment standards affecting employees in the private sector and in federal, state, and local governments. And despite its fundamental importance to American society, courts, employers and employees alike have struggled for decades with interpreting this law.
This past Wednesday, the United States Supreme Court issued a decision that should assist employers in resolving disputes over alleged noncompliance with the overtime and minimum-wage provisions of the FLSA. In E.M.D. Sales, et al v. Carrera, et al, a group of sales representatives (the “employees”) argued that their employer violated the FLSA by failing to pay them overtime; i.e., by not paying them one-and-a-half times their normal hourly rates for working more than 40 hours in a workweek. In turn, E.M.D. Sales (“EMD” or the “Company”) argued that the sales representatives qualified for the outside sales exemption (a provision of the statute stating that the law does not apply to an “outside salesman”) and were thus exempt from the FLSA’s overtime requirement. The federal trial court found in favor of the employees because EMD was unable to prove by “clear and convincing evidence” that its sales representatives were outside salesman. Although the usual standard of evidence required to prevail in a civil trial in federal court is a “preponderance of the evidence,” the higher “clear and convincing evidence” standard does apply in limited circumstances.
On appeal, EMD argued that the trial court committed reversible error by applying the wrong standard of proof to the employees’ claims. Specifically, the Company argued that the trial court should have applied the less stringent preponderance-of-the-evidence standard instead of the clear-and-convincing standard. The former standard requires the Company to show only that it was “more likely than not” that the employees were properly classified, while the latter standard requires the Company to offer evidence that is “clear and convincing,” i.e., highly and substantially more likely to be true than not. On appeal, the Fourth Circuit Court of Appeals sided with the employees.
On appeal to the Supreme Court, however, the Court agreed with the Company’s argument, reversing the decisions of the two lower courts, and holding that as in the great majority of civil cases, employers need only offer evidence that is slightly more convincing than the evidence offered by the employee(s) to demonstrate that an employee or group of employees is exempt from the minimum-wage and overtime-pay provisions of the FLSA. Of course, the Supreme Court’s decisions constitute the law of the land when it comes to the Constitution and federal statutes – meaning that all courts presiding over cases brought under the FLSA will need to follow this decision when deciding cases that concern the law’s minimum-wage and overtime-pay provisions.
So, what is the main takeaway here? Employers in the Fourth Circuit will have an easier time demonstrating that certain categories of employees are properly classified as exempt from the minimum-wage and overtime-pay provisions of the FLSA. And any doubt about the standard of evidence applicable in cases brought under the FLSA has been resolved. Nonetheless, employers of all sizes should always stay vigilant about ever-changing state laws that are not governed by this Supreme Court decision. And most importantly, employers subject to the FLSA (which means most employers) should make sure that they are constantly working to comply with the FLSA.
If you want to learn more about the impact of the Supreme Court’s decision in E.M.D. Sales v. Carrera, or need help complying with the FLSA, please contact any member of our Labor, Employment & Employee Benefits practice.
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Alerts, commentary, and insights from the attorneys of Pullman & Comley’s Labor, Employment Law and Employee Benefits practice on such workplace topics as labor and employment law, counseling and training, litigation, union issues, as well as employee benefits and ERISA matters.